2013 (2) TMI 943 - HC - Companies Law

Summary

Issues Involved:

1. Applicability of Section 446 of the Companies Act in voluntary winding up.
2. Validity of the sale of the company's property by GIDC.
3. Rights of the company in liquidation concerning the property.
4. Financial liabilities and entitlements of the company and GIDC.
5. Equitable relief and compensation for the parties involved.

Detailed Analysis:

1. Applicability of Section 446 of the Companies Act in Voluntary Winding Up:

The court examined whether Section 446 of the Companies Act, which restricts proceedings against a company without the court's leave, applies to voluntary winding up. It was argued that Section 446 might not apply as no court order initiated the winding up. However, the court concluded that Section 446 does apply to voluntary winding up, as the provision aims to safeguard the company's assets and ensure equitable distribution among creditors. The court referenced the Supreme Court's interpretation in the case of The Neptune Assurance Co. Ltd. to support this view, emphasizing that the objectives of Section 446 are to protect the company's assets from being dissipated through litigation.

2. Validity of the Sale of the Company's Property by GIDC:

The sale of the company's property by GIDC to respondent No.3 was contested. The court found that the sale was executed without the leave of the Company Court, violating Section 446. However, it noted that GIDC acted in bona fide, following the dismissal of the company's legal actions to prevent the sale. The court acknowledged that the sale was conducted in good faith and not with the intent to undermine the company's interests.

3. Rights of the Company in Liquidation Concerning the Property:

The court explored the nature of the company's rights in the property, which was initially held under a license agreement with GIDC. It was argued that the company had no vested interest in the property post-termination of the license. However, the court determined that the license agreement was part of a broader regulatory framework, granting the company certain rights, including the potential to convert the license into a lease upon full payment. Thus, the company retained a salable interest in the property, which should have been protected during the winding-up process.

4. Financial Liabilities and Entitlements of the Company and GIDC:

The court assessed the financial obligations between the company and GIDC. It was established that the company owed GIDC Rs. 7,51,289/- as of the eviction notice date, with interest accruing until the possession was taken over. The court ruled that GIDC should deduct this amount from the Rs. 16,48,600/- received from the sale and return the balance to the company's liquidator. This decision aimed to ensure that the company's creditors could access the remaining funds for distribution.

5. Equitable Relief and Compensation for the Parties Involved:

Considering the bona fide actions of GIDC and the subsequent investments made by respondent No.3, the court opted not to annul the sale or return the property to the company. Instead, it ordered GIDC to pay the net sale proceeds to the liquidator, with interest at 8% per annum from the date of possession until payment. This approach balanced the interests of all parties, ensuring the company's creditors received their due share while acknowledging the legitimate actions of GIDC and respondent No.3. Additionally, the court imposed a cost of Rs. 5,000/- on GIDC, payable to the liquidator, for the procedural lapses in handling the property sale.